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Opportunities and Obstacles for Rural Entrepreneurs

When it comes to cultivating entrepreneurship, rural America has the national market cornered.

Our latest infographic, “Rural Entrepreneurship” explores how running a business in rural communities differs from their suburban and urban counterparts.

Self-employment has dropped precipitously across the country over the last three decades, however, it has remained strongest in America’s heartlands. While businesses owned by rural entrepreneurs may grow slower than their urban and suburban counterparts, they also tend to be more profitable.

The Entrepreneurial Benefits of a Rural Environment

Thanks to the rise of digital technology, entrepreneurs who grow up in rural areas no longer have to relocate to a major metropolis to build successful, scalable businesses. There are plenty of reasons why small businesses succeed in rural communities:

Rural areas typically have a lower cost of living than urban and suburban areas

Meanwhile, rural businesses tend to operate at a higher profitability margin than urban businesses (56 percent to 53 percent on average), and they are typically comparable in revenue to urban companies. This means rural entrepreneurs keep more of their business revenue and are subsequently able to provide a higher quality of life for them and their families.

And the future is bright.

According to a study commissioned by Amazon and published earlier this year, “The economic potential of small businesses in rural America is far-reaching and has the potential to be a significant contributor to the country’s sustained economic growth.”

Challenges still exist, however.

The Entrepreneurial Challenges of a Rural Environment

Despite its great potential, rural entrepreneurs do face significant barriers. Most can be broken down into three areas.

1. Access to Capital

In a recent study, one in five rural small business owners listed access to capital as one of their biggest hurdles. While is consistently cited as a barrier to entry by entrepreneurs in every location, rural businesses face particular difficulty. The top issues they face when attempting to gain access to funding include:

Poor credit

Lack of collateral

Lack of trusted lenders

High interest rates

Consequently, a steep majority of rural entrepreneurs (71 percent) say they used their personal savings to start their businesses.

Small business owners in rural areas also don’t have access to resources that can help them navigate the lending options available to them. While business mentors, small business investors and business support organizations may be prevalent in urban areas, they aren’t as numerous in rural America. However, are available online to reach entrepreneurs in every corner of the country.

2. Access to Labor

Rural areas aren’t typically teeming with a wide array of industries, and this lack of business diversity limits the economic opportunities available to entry-level workers. As a result, college graduates and other young adults hoping to find well-paying jobs that suit their skillset look for work outside their small-town communities. This, in turn, leaves many rural business owners struggling to find qualified, experienced and well-educated employment prospects.

Rural entrepreneurs say they encounter a number of barriers when attempting to find qualified employees:

39 percent say they couldn’t find candidates with the right kind of experience

37 percent said their communities lacked an adequate talent pool

35 percent said they had difficulty finding candidates with the right education, skills or training

23 percent said it was tough to find people willing to relocate

When it comes to retaining qualified employees, rural business owners must overcome obstacles there, as well:

61 percent said their employees found other jobs with more opportunities for advancement

56 percent said they were unable to pay employees well enough to keep them

52 percent said their employees relocated to urban areas

50 percent said their employees left due to a lack of time invested for professional development or training

The rise of the Internet may have helped de-emphasize the need for a business to have a flashy storefront or a strategic geographical location, but location still matters when it comes to acquiring and retaining a talented team of employees.

3. Access to Connectivity

Although telecommunication companies have made great strides in improving access to broadband for rural communities over the years, still do not have access to a high-speed connection. This is a big problem.

For 20 percent of rural small businesses, a majority of their revenue (80 percent) comes from the Internet. Over the past three years, digital technology has increased gross sales for these businesses by 17.2 percent. And yet, according to the Amazon report:

Just 44 percent of rural small businesses have good access to digital technology

More than 20 percent of rural small businesses do not have high-speed broadband

5.4 percent of rural small businesses still use dial-up services to access the Internet

Limited access to high-speed internet is a significant challenge for rural small businesses. Not only does stable connectivity lead to growth, it also helps businesses recruit and retain top talent, maintain steady supply chains and promote goods and services.

There are many rewards to operating a small business in a rural community, but they don’t come without their risks. Whether your business is rural, suburban, urban or online, SCORE mentors are available on the web or at 300 chapters across the U.S. Find your mentor today!

About the Author(s)

Bridget Weston is the CEO of the SCORE Association, where she provides executive leadership and works directly and collaboratively with the Board of Directors to establish the vision and direction of SCORE.

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.